Kuwait: A Concentrated Solar Power (CSP) market worth entering?

Progress in Kuwait’s Concentrated Solar Power (CSP) projects has been slower than anticipated. While the net gas importer signed multi-year supply deals for liquefied natural gas with Qatargas and Shell, and is considering similar agreements with Iran and the United States, it has been dragging its feet on the renewable energy front.



What’s new?

As previously reported by CSP Today, at least three Concentrated Solar Power (CSP) projects are under planning or development in Kuwait, two of which are moving ahead. The most advanced is the 50 MW Shagaya CSP plant, the EPC contract which was awarded in April to Cobra Group in partnership with Kuwait’s UGETCO.

A virtual tour of the Shagaya Renewable Energy Park now shows what the project will look like in the future. Encompassing the R&D village of Kuwait Institute for Scientific Research (KISR), the site appears to be massive, possibly to accommodate for future expansion.

Indeed, the Shagaya project is the first of a three-phased master plan proposed by KISR – one that aims to raise the park’s solar power capacity to 2,000 MW by 2030. This will include 1,150 MW of CSP and 720 MW of PV that will likely be tendered on an IPP basis, according to a MEED report.

The 280 MW Abdaliyah ISCC plant, which will consist of a 60 MW trough solar collector, also seems to be moving forward. Requests for qualifications were issued in the second quarter of 2014, and expressions of interest were invited by 23 July 2014. The next step will be to invite requests for qualifications before the end of 2014.

Al-Abdaliyah is being jointly developed by the Partnerships Technical Bureau (PTB) in collaboration with the Ministry of Electricity and Water. Interestingly, PTB is already considering the possibility of offering shares in Al-Abdaliyah by the end of 2014, alongside two of the country’s largest planned projects.

According to a report by the Kuwait Finance House, project companies will be established for the assets by the selected bidders and a 60% stake in the project company will then be publically offered to both national and foreign investors.

Solar EOR on the horizon

Meanwhile, plans for using CSP in enhanced oil recovery (EOR) surfaced several times in the past few years. Not coincidentally one of the major providers of solar-EOR technology, GlassPoint, stepped into the Kuwaiti market last March with a new office, and appointed former Kuwait Oil Company deputy managing director Abdul Hussain Shehab as country chairman.

“The first potential solar pilot will take place in northern Kuwait, where there are large deposits of heavy oil. We have known about it for a long time and over many years we have been planning to produce heavy oil with steam injection. Now comes along solar energy, which we can use to produce steam,” Shehab was quoted as saying in OPEC’s April 2014 Bulletin.

California-based CSP developer eSolar has also been exploring opportunities in the oil-rich Gulf nation. The company’s solar thermal technology is designed for use in the power, EOR, desalination and industrial process heat markets.

“The purpose of our visit to Kuwait recently was to shore up local partners for a consortium to bid on solar power as well as non-power applications in Kuwait that are coming at the end of this year and we believe early next year,” John Van Scoter, CEO of eSolar, told CSP Today.

“Our modular system is designed to be rapidly constructed, there are no concrete foundations or heavy equipment; it’s all done with hand tools. You can decommission it, move it to another location, reconstruct, start-up and get more return on investment over the full life of equipment,” explains Van Scoter.

According to him, in an EOR application, it’s quite conceivable that the solar equipment will be need to be moved over its designed life. “It’s hard to believe that you would need EOR in one location for 30 years; it’s quite possible that you would do EOR in a certain area for 5-7 years”.

Planned thermal EOR projects in North Kuwait and the Neutral Zone will require burning significant amounts of costly fuel oil or imported natural gas to generate steam. This steam could instead be supplied through CSP and at a much lower cost.

For example, KOC’s North Kuwait field, which produces 24% of the company’s oil, is undergoing a massive heavy oil development programme, for which a five-year budget of US$5.3 billion has been allocated to raise production by 43%.

“Kuwait represents one of the largest market opportunities for solar-powered oil production worldwide,” says Rod MacGregor, CEO of GlassPoint. “Using the sun’s energy to produce steam could supply the majority of Kuwait’s thermal EOR needs, freeing valuable gas and fuel resources for higher value uses.”

Investment climate

As with most neighbouring countries, Kuwait’s solar industry is still in its infancy, which in itself poses a challenge. Moreover, business practices largely differ from those in western markets, as Van Scoter highlights. “I think one of the biggest challenges in the Kuwaiti solar market is finding the right local partners that can navigate the landscape and offer real value.

“Secondarily, the way a lot of projects in Kuwait are structured – the requirement, for example, for five years before ownership is taken – is different from many other countries. That presents a challenge in putting together a consortium, including a local partner willing to get paid at the end of the five years. It changes the return on the project”.

It is worth noting that foreign companies and consortiums in Kuwait can only bid on project tenders in partnership with local agents.

Furthermore, local manufacturers are provided a preferential price advantage – they’re allowed to price their goods up to 10% higher than those made abroad. GCC companies are also given a similar 5% price preference, and up to 10% if not competing with a Kuwaiti-made product. The incentives, however, apply to local manufacturers and not contractors.

What this means is that developers and contractors are cleverly incentivized to use locally-manufactured products, despite the lack of a specific law stipulating local content across Kuwait’s projects.

“In general, I think Kuwaitis are more pro-business compared to some of the other countries,” remarks Van Scoter. We see opportunities in power and non-power in Kuwait, and expect that there will be multiple commercial pilots that we’ll participate in the coming few years”.




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